TCE and its applications in management research put more emphasis on opportunism than on bounded rationality. By augmenting the bounded rationality assumption to include interpretive limitations, we show that there are sources of costly conflict that are not rooted in opportunism. Moreover, we show that bounded rationality may drive opportunism. All hierarchal forms are inherently subject to specific bounded-rationality-based conflicts, thus have different capacities to mitigate bounded-rationality-based transaction costs.